Exam 16: Simple Interest

Molly Joy owns her own car. Her June monthly interest was $205. The rate is 13 1/2%. Find out what Joy's principal balance is at the beginning of June. Use 360 days. (Do not round denominator in calculation.)

Matty Kaminsky owns a new Volvo. His June monthly interest is $400. The rate is 8 ½%. Matty's principal balance at the beginning of June is (use 360 days):

Janet took out a loan of $50,000 from Bank of America at 8% on March 19, 2012, which is due on July 8, 2012 Using exact interest, the amount of Janet's interest cost is:

Solve:

Which of the following is not true of the U.S. Rule?

Simple interest loans are usually more than one year.

Ordinary interest results in a slightly higher rate of interest than exact interest.

The exact interest method represents time as the exact number of days divided by 365.

In the U.S. Rule, the partial payment first covers the interest and the remainder reduces the principal.

Joan Roe borrowed $85,000 at a rate of 11 3/4%. The date of the loan was July 8. Joan is to repay the loan on Sept. 14. Assuming the loan is based on exact interest, the interest Joan will pay on Sept. 14 is:

Abby borrowed $3,000 at 12 3/4% on Sept. 10. The loan is due on Jan. 29. Assuming the loan is based on ordinary interest, how much will Abby pay on Jan. 29?

Ordinary interest is never used by banks.

Sandra Gloy borrowed $5,000 on a 120-day 5% note. Sandra paid $500 toward the note on day 40. On day 90 she paid an additional $500. Using the U.S. Rule, her adjusted balance after the first payment is:

The amount charged for the use of a bank's money is called:

Bill Roe visits his local bank to see how long it will take for $1,000 to amount to $1,900 at a simple interest rate of 12 1/2%. Can you provide Bill with the solution to his problem in years?

In calculating interest in the U.S. Rule from the last partial payment, the interest is subtracted from the adjusted balance.

Solve:

Federal Reserve banks as well as the federal government like to calculate simple interest based on:

Given: a 12% 90-day $4,000 note. Find the adjusted balance (principal) using the U.S. rule (360 days) after the first $800 payment on the 40th day.

Given: a 11% 120-day $9,000 note. Find the adjusted balance (principal) using the U.S. Rule (360 days) after the first payment on the 65th day of $1,000.